Soon after the Budget announcement, insurance cover on bank deposits has been increased from Rs 1 lakh to Rs 5 lakh effective Tuesday, the Reserve Bank of India (RBI) said. Deposit insurance was static at Rs 1 lakh since 1993. The cover is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the RBI.
The increase, the RBI said, has been done with a view to providing a greater measure of protection to depositors. On Saturday, Finance Minister Nirmala Sitharaman had announced the increase of insurance cover to Rs 5 lakh in her Budget Speech.
The move will help boost the confidence of people in the banking system after a scam last year in Punjab and Maharashtra Cooperative Bank (PMC Bank) which affected lakhs of customers. As the insurance cover stands increased, the banks will pay a premium of 12 paise against 10 paise per Rs 100 deposit. The deposit insurance scheme covers all banks operating in India, including the private sector, cooperative and even branches of foreign banks.
There are some exemptions such as deposits of foreign governments, deposits of central and state governments, and inter-bank deposits.